How Does Blockchain Work?

One of the biggest buzzwords in tech right now is blockchain. However, many people have little or no understanding of how blockchain technology works, or what it makes it so revolutionary.

It’s important to keep in mind that while Bitcoin is the most famous application of blockchain technology, it is far from the only application created by blockchain developers.

A blockchain is simply a distributed and decentralized database that keeps track of things (for example, the Bitcoin blockchain keeps track of all financial transactions involving Bitcoin). Unlike traditional databases, all data is stored in blocks, and these blocks are then connected to each other as part of a large chain. Hence, the term “blockchain.” Some also refer to blockchain as a “distributed ledger,” since its primary function is to keep track of things.

That’s just a simple, high-level overview of what a blockchain is and how blockchain works. Things get really interesting when you consider what makes a blockchain distributed public ledger different from all other databases in the world:

It is Decentralized and Distributed

This means that there is not one central copy of the database; instead, it widely distributed to many other computers. At any point in time, every single copy of this database must be exactly the same. This enables the creation of a distributed P2P network.

It is Immutable

This means that data or information, once it is added to the blockchain, can not be changed. A blockchain is tamper-proof.

It is Secured via Cryptography

The reason why Bitcoin is referred to as a “cryptocurrency” is because it relies on cryptography. Each block of the blockchain is linked to the previous block in the blockchain by a cryptographic hash. You can think of this hash as a single number that contains all information about the block. If anyone attempts to change this hash, it will break the blockchain.

It Uses a Proof-of-Work Mechanism to Add New Blocks to the Blockchain

In the case of Bitcoin, the time that it takes to add a new block of data to the blockchain is approximately 10 minutes. This is the amount of time that it takes a Bitcoin miner to solve a cryptography problem. Once a miner solves this cryptography problem, all other computers on the network must agree that this is the right solution. It is only then that the newly mined block is added to the blockchain.

Understanding these basics of what makes a blockchain will give you better insight into possible applications for blockchain development. Blockchain technology can be used by blockchain developers to create solutions for logistics by tracking shipments worldwide. Blockchain for business also means that it can be used for tracking other forms of financial assets or for tracking medical records. In the realm of politics, it can be used to verify election results. Using blockchain is more than just Bitcoin – it is about changing the way the world stores, exchanges, and controls information.

Hassan Sarwar is Founder and CEO at InfiniOne, which he launched in 2012 out of his dorm at the University of Southern California. He is on a mission to make building technology easier for businesses in today’s connected world.